1. 70-397 Venture Finance Fall 2002 Slide 1 Class 8 Notes Due Diligence Part 2 © Andrew W. Hannah

2. 70-397 Venture Finance Fall 2002 Slide 2 Agenda Homework due tonight Teams email – any questions? Confidentiality Agreement: Saket Jay K Nihar Diligence A WA pages 114 - 141 Guest Speaker on Diligence Craig Gomulka – Draper Triangle Diligence A Other stuff (WA and Recommendations) © Andrew W. Hannah

3. 70-397 Venture Finance Fall 2002 Slide 3 Diligence A How was it? Why was it difficult? Other than the fact that you started the assignment 24 hours before it was due? Even though I gave the assignment to you two weeks before it was due! Isn’t it a simple question? How many domestic companies are likely customers in 2003 for PolyTronics ESD coatings products? What could have made it easier? Did anyone ask questions of the Company? © Andrew W. Hannah

4. 70-397 Venture Finance Fall 2002 Slide 4 Winning Angels What winners do Focus on the model, not the plan Emphasize the entrepreneur and the team Start with the exit Focus on deals where they know something Red Flags – entrepreneur and team Salary is utmost on their minds The business plan claims 10 sources or products They say or do anything dishonest They are not realistic about their own abilities They only need 1% of the market They have not identified the first customer © Andrew W. Hannah

5. 70-397 Venture Finance Fall 2002 Slide 5 Investment Recommendations Goals Present a clear picture of the company, product and opportunity Present the diligence results in a manner that supports the recommendation Basis for the recommendation Markets – size, growth rate, key features Competition 0 direct and indirect, key features, strength and weaknesses Comparables – business model, financials, valuation Valuation – how much? Exit and when? © William Hulley and Andrew W. Hannah

6. 70-397 Venture Finance Fall 2002 Slide 6 Investment Recommendations (Cont.) What is included in the company’s plan? The Overview – a presentation of the company’s plan Market Customer Product Management Competition Competitive Advantages Financial Overview The Diligence Market Competition Comparables Valuation Recommendation – yes or no and why The diligence memos (as appendices) © William Hulley ContentSoft Example

7. 70-397 Venture Finance Fall 2002 Slide 7 Next Week Discussion of Content Soft Recommendation Valuation!!! In Two Weeks (moved from 10/22 to 10/29) Diligence Card “B” – comparables WA: 143 – 177 (this is different than the syllabus) © Andrew W. Hannah